PURPOSE: To set forth an agency-wide clause that
may be used for equitable adjustments under contracts for construction,
dismantling, demolishing, or removing improvements that are contemplated
to be fixed-price and exceed the simplified acquisition threshold.

BACKGROUND: Several of the centers have routinely
used clauses containing ceilings on indirect costs and profit
as a means for handling equitable adjustments under construction
contracts. In order to provide consistency and eliminate the need
for centers to establish their own clauses, an Agency-wide clause
was developed. Neither the use of the clause, nor the ceiling
rates contained in it are mandatory. Flexibility is provided so
that the clause is only used when appropriate and to allow for
differences, such as terminology, that exist in the construction
industry in different parts of the United States. Although not
mandatory, the ceiling rates in the clause are benchmarks as to
what is considered to be reasonable based on NASA's experience
and that of the General Services Administration and the Department
of Veterans Affairs, agencies which also use similar clauses that
contain the same ceiling rates.

REGULATION: Parts 1843 and 1852 are amended as set
forth in the enclosed replacement pages to the NFS.

REPLACEMENT PAGES: You may use the enclosed pages
to replace Part 1843, 52:3, 52:4, 52:73, 52:74, 52:75, 52:76,
52:77, 52:78, 52:78.1 (added), 52:91, 52:92, 52:93, 52:94, 52:95,
52:96, 52:97 and 52:98 to the NFS. In PN 97-9, regulatory language
was inadvertently dropped from pages 52:19 and 52:20. That language
has been recovered, and pages 52:19 and 52:20 are reissued.

REGULATORY COMPLIANCE: This PN was published as
a final rule in the Federal Register (63 FR 17339-17340, dated
April 9, 1998).

EFFECTIVE DATE: This PN is effective as dated and
shall remain in effect until canceled or superseded.

As authorized in the prefaces of clauses FAR 52.243-1, Changes--Fixed
Price; FAR 52.243-2, Changes--Cost Reimbursement; FAR 52.243-3,
Changes--Time-and-Material or Labor-Hours; and FAR 52.243-4, Changes,
the period within which a contractor must assert its rights to
an equitable adjustment may be varied not to exceed 60 calendar
days.

1843.205-70 NASAcontractclauses.

(a)(1) The contracting officer may insert in contracts a clause
substantially the same as 1852.243-70, Engineering Change Proposals,
when ECPs are expected. Paragraphs (c) and (d) of the basic clause
and Alternate I of the clause shall be changed to reflect the
specific type of contract. A local format may be substituted for
the MIL-STD-973 format.

(2) If it is desirable to preclude a large number of small-dollar,
contractor-initiated engineering changes and to reduce the administrative
cost of reviewing them, the contracting officer shall use the
clause with its Alternate I.

(3) If the contract is a cost-reimbursement type, the contracting
officer shall use the clause with its Alternate II.

(b) The contracting officer may insert a clause substantially
as stated at 1852.243-72, Equitable Adjustments, in solicitations
and contracts for -

(1) Dismantling, demolishing, or removing improvements; or

(2) Construction, when the contract amount is expected to exceed
the simplified acquisition threshold and a fixed-price contract
is contemplated.

Subpart 1843.70-- Undefinitized Contract Actions

1843.7001 Definitions.

"Undefinitized contract action (UCA)" means a
unilateral or bilateral contract modification or delivery/task
order in which the final price or estimated cost and fee have
not been negotiated and mutually agreed to by NASA and the contractor.
(Issuance of letter contracts and their modifications are governed
by subpart 1816.6.)

1843.7002 Policy.

Undefinitized contract actions shall be executed by contracting
officers on an exception basis and shall be limited to the minimum
urgent requirements. The contract file for all UCAs shall be documented
to justify issuance and shall include a Government estimate for
the changed requirements.

1843.7003 Procedures.

(a) Issuance of undefinitized contract actions with a Government
estimated cost or price over $1,000,000 must be approved in writing
by the Center Director. This approval authority is not delegable.
Issuance of undefinitized contract actions with a Government estimated
cost or price less than or equal to $1,000,000 shall also be minimized
but may be approved on an exception basis in accordance with installation
procedures.

(b)(1) Undefinitized contract actions exceeding $1,000,000 approved
by the Center Director shall be issued as bilateral agreements
setting forth a ceiling price or "not to exceed" estimated
cost figure for the changed contractual requirements. For fixed
price contracts the negotiated price for the changed contract
requirements shall not exceed the established ceiling price. In
the case of cost type contracts any costs eventually negotiated
for the changed requirements in excess of the "not to exceed"
estimated cost figure shall be non-fee bearing. The ceiling price
or "not to exceed" estimated cost figures shall be separately
identified in the UCA instrument from the pricing structure of
the basic contract.

(2) The Center Director may waive the ceiling price or "not
to exceed" estimated cost figure and bilateral agreement
requirements prior to UCA issuance on the basis of urgency. This
waiver authority is not delegable. Any waivers shall be documented
in the contract file.

(c) The changed contractual requirements set forth in the UCA
shall be clearly defined and shall be limited to the minimum effort
required to satisfy urgent program requirements while a cost proposal
is prepared, analyzed and negotiated.

(d) For undefinitized contract actions with a Government estimate
greater than $1,000,000 and not excepted under subpart 1843.7004,
a 180 day funding profile shall be obtained from the contractor
prior to execution of the undefinitized contract action.

(e) Undefinitized contract actions with a Government estimated
cost or price greater than $1,000,000 shall include a requirement
that the change shall be separately accounted for by the contractor
to the degree necessary to provide the contracting officer visibility
into actual costs incurred pending definitization. The contracting
officer may waive this requirement for individual actions if there
is a documented finding that such accounting procedures would
not be cost effective. Any such waiver shall not affect existing
NASA Form 533 or other financial reporting requirements set forth
in the contract.

1843.7004 Exceptions.

(a) Exceptions to the requirement for Center Director approval
for issuance of undefinitized contract actions are--

(1) Modifications to facilities contracts;

(2) Modifications to construction contracts using Construction
of Facilities funding;

(3) Urgent modifications resulting from Shuttle manifest changes
or that involve immediate issues of safety or damage/loss of property;

(4) Modifications to decrease the contract value; or

(5) Modifications to letter contracts.

(b) The contract file for any of the modifications in paragraph
(a) of this section shall cite the exception and include complete
supporting rationale for its applicability.

1843.7005 Definitization.

(a) Undefinitized contract actions should be sufficiently complete
and detailed as to enable the contractor to begin immediate preparation
of a cost proposal for the changed requirement. The NASA goal
is to definitize UCAs within 180 days from date of issuance.

This subpart establishes and describes the methods for implementing
and administering a Shared Savings Program. This program provides
an incentive for contractors to propose and implement, with NASA
approval, significant cost reduction initiatives. NASA will benefit
as the more efficient business practices that are implemented
lead to reduced costs on current and follow-on contracts. In return,
contractors are entitled to share in cost savings subject to limits
established in the contract. The contracting officer may require
the contractor to provide periodic reporting, or other justification,
or to require other steps (e.g., cost segregation) to ensure projected
cost savings are being realized.

1843.7102 Solicitation provision and contract clause.

The contracting officer shall insert the clause at 1852.243-71,
Shared Savings, in all solicitations and contracts expected to
exceed $1,000,000, except those awarded under FAR Part 12, NRA
and AO procedures, or the SBIR and STTR programs.

This part, in conjunction with FAR Part 52, (a) sets forth the
provisions and clauses prescribed in the NFS, (b) gives instructions
for their use, and (c) presents a matrix listing the provisions
and clauses applicable to each principal contract type and/or
purpose (e.g., fixed-price supply, cost-reimbursement research
and development).

(e)(1) The NFS matrix in Subpart 1852.3 is formatted similarly
to that in the FAR. The first page of the NFS matrix contains
a key to column headings, a dollar threshold chart, and requirement
symbols. To fully determine the applicability of a provision or
clause in the "required-when-applicable" and "optional"
categories, Contracting Officers shall refer to the NFS text (cited
in the matrix) that prescribes its use.

(4) The NFS matrix may be reproduced by field installations for
the purpose of supplementing it with installation-developed provisions
and clauses.

1852.103 Identification of provisions and clauses.

(b) Provisions and clauses prescribed by a field installation
to satisfy its needs shall be identified as stated in paragraphs
(b)(i) and (ii) of this section. Articles, formats, and similar
language shall be treated as provisions and clauses for purposes
of this section 1852.103.

(i) A provision or clause shall be numbered using a prefix,
a base, and a suffix. The prefix shall be an alphabetical abbreviation
of the installation name (e.g., ARC, DFRC, GSFC, CW, JSC, KSC,
LARC, LERC, MSFC, SSC, or SSPO). The base shall be a numeric value
beginning with "52.2," with the next two digits corresponding
to the number of the FAR or NFS subject part to which the provision
or clause relates. The suffix shall be a hyphen and sequential
number assigned within each part. NASA installations shall use
suffix numbers from -90 to -199. For example, the first Johnson
Space Center (JSC) provision or clause relating to Part 36 of
the FAR or NFS shall be JSC 52.236-90, the second JSC 52.236-91,
and so forth. Provisions and clauses shall be dated in accordance
with FAR 52.101(f).

(ii) Contracting officers shall identify provisions and
clauses as in the following examples:

(End of clause)

ALTERNATE I

(SEPTEMBER 1993)

As prescribed in 1816.406-70(e), insert the following sentence
at the end of the clause:

(1) For research development hardware contracts, insert [equal
to total earned award fee (including any base fee)]. For production
hardware contracts, insert [$total potential award fee amount,
including any base fee)].

(End of clause)

1852.216-87 Submission of Vouchers for Payment

As prescribed in 1816.307-70(e), insert the following clause:

SUBMISSION OF VOUCHERS FOR PAYMENT

(MARCH 1998)

(a) The designated billing office for cost vouchers for purposes
of the Prompt Payment clause of this contract is indicated below.
Public vouchers for payment of costs shall include a reference
to the number of this contract.

(b) (1) If the contractor is authorized to submit interim cost
vouchers directly to the NASA paying office, the original voucher
should be submitted to:

[Insert the mailing address for submission of cost vouchers]

(2) For any period that the Defense Contract Audit Agency has
authorized the Contractor to submit interim cost vouchers directly
to the Government paying office, interim vouchers are not required
to be sent to the Auditor, and are considered to be provisionally
approved for payment, subject to final audit.

(3) Copies of vouchers should be submitted as directed by the
Contracting Officer.

(c) If the contractor is not authorized to submit interim cost
vouchers directly to the paying office as described in paragraph
(b), the contractor shall prepare and submit vouchers as follows:

(2) Five copies of SF 1034, SF 1035A, or equivalent Contractor's
attachment to the following offices by insertion in the memorandum
block of their names and addresses:

(i) Copy 1 NASA Contracting Officer

(ii) Copy 2 Auditor

(iii) Copy 3 Contractor

(iv) Copy 4 Contract administration office; and

(v) Copy 5 Project management office.

(3) The Contracting Officer may designate other recipients as
required.

(d) Public vouchers for payment of fee shall be prepared similarly
to the procedures in paragraphs (b)or (c) of this clause, whichever
is applicable, and be forwarded to:

[insert the mailing address for submission of fee vouchers]

This is the designated billing office for fee vouchers for purposes
of the Prompt Payment clause of this contract.

(e) In the event that amounts are withheld from payment in accordance
with provisions of this contract, a separate voucher for the amount
withheld will be required before payment for that amount may be
made.

(End of clause)

1852.216-88 Performance Incentive.

As prescribed in 1816.406-70(f), insert the following clause:

PERFORMANCE INCENTIVE

(JANUARY 1997)

(a) A performance incentive applies to the following hardware
item(s) delivered under this contract: (1)

The performance incentive will measure the performance of those
items against the salient hardware performance requirement, called
"unit(s) of measurement," e.g., months in service or
amount of data transmitted, identified below. The performance
incentive becomes effective when the hardware is put into service.
It includes a standard performance level, a positive incentive,
and a negative incentive, which are described in this clause.

(b) Standard performance level. At the standard performance
level, the Contractor has met the contract requirement for the
unit of measurement. Neither positive nor negative incentives
apply when this level is achieved but not exceeded. The standard
performance level for (1)is established as follows:
(2)

(c) Positive incentive. The Contractor earns a separate
positive incentive amount for each hardware item listed in paragraph
(a) of this clause when the standard performance level for that
item is exceeded. The amount earned for each item varies with
the units of measurement achieved, up to a maximum positive performance
incentive amount of $ (3)per item. The units of
measurement and the incentive amounts associated with achieving
each unit are shown below: (4)

(d) Negative incentive. The Contractor will pay to the
Government a negative incentive amount for each hardware item
that fails to achieve the standard performance level. The amount
to be paid for each item varies with the units of measurement
achieved, up to the maximum negative incentive amount of $ (5). The units of measurement and the incentive amounts associated
with achieving each unit are shown below: (6)

(e) The final calculation of positive or negative performance
incentive amounts shall be done when performance (as defined by
the unit of measurement) ceases or when the maximum positive incentive
is reached.

(1) When the Contracting Officer determines that the performance
level achieved fell below the standard performance level, the
Contractor will either pay the amount due the Government or credit
the next payment voucher for the amount due, as directed by the
Contracting Officer.

(2) When the performance level exceeds the standard level, the
Contractor may request payment of the incentive amount associated
with a given level of performance, provided that such payments
shall not be more frequent than monthly. When performance ceases
or the

Contractor's on-site personnel work during a holiday other than
those in paragraph (a) above, no form of holiday or other premium
compensation shall be reimbursed as either a direct or indirect
cost. However, this does not preclude reimbursement for authorized
overtime work that would have been overtime regardless of the
status of the day as a holiday.

(d) The Contractor shall place identical requirements, including
this paragraph, in all subcontracts that require performance of
work on-site, unless otherwise instructed by the Contracting Officer.

ALTERNATE II

(SEPTEMBER 1989)

As prescribed in 1842.7001(c), add the following paragraphs (e)
and (f):

(e) When the NASA installation grants administrative leave to
its Government employees (e.g., as a result of inclement weather,
potentially hazardous conditions, or other special circumstances),
Contractor personnel working on-site should also be dismissed.
However, the contractor shall provide sufficient on-site personnel
to perform round-the-clock requirements of critical work already
in process, unless otherwise instructed by the Contracting Officer
or authorized representative.

(f) Whenever administrative leave is granted to Contractor personnel
pursuant to paragraph (e) of above, it shall be without loss to
the Contractor. The cost of salaries and wages to the Contractor
for the period of any such excused absence shall be a reimbursable
item of cost under this contract for employees in accordance with
the Contractor's established accounting policy.

1852.242-73 NASA Contractor Financial Management Reporting.

As prescribed in 1842.7202, insert the following clause:

NASA CONTRACTOR FINANCIAL MANAGEMENT REPORTING

(JULY 1997)

(a) The Contractor shall submit NASA Contractor Financial Management
Reports on NASA Forms 533 in accordance with the instructions
in NASA Policy Guidance (NPG) 9501.2, NASA Contractor Financial
Management Reporting, and on the reverse side of the forms, as
supplemented in the Schedule of this contract. The detailed reporting
categories to be used, which shall correlate with technical and
schedule reporting, shall be set forth in the Schedule. Contractor
implementation of reporting requirements under this clause shall
include NASA approval of the definitions of the content of each
reporting category and give due regard to the Contractor's established
financial management information system.

(b) Lower level detail used by the Contractor for its own management
purposes to validate information provided to NASA shall be compatible
with NASA requirements.

(c) Reports shall be submitted in the number of copies, at the
time, and in the manner set forth in the Schedule or as designated
in writing by the Contracting Officer. Upon completion and acceptance
by NASA of all contract line items, the Contracting Officer may
direct the Contractor to submit Form 533 reports on a quarterly
basis only, report only when changes in actual cost occur, or
suspend reporting altogether.

(d) The Contractor shall ensure that its Form 533 reports include
accurate subcontractor cost data, in the proper reporting categories,
for the reporting period.

(e) If during the performance of this contract NASA requires a
change in the information or reporting requirements specified
in the Schedule, or as provided for in paragraph (a) or (c) of
this clause, the Contracting Officer shall effect that change
in accordance with the Changes clause of this contract.

(End of clause)

1852.243-70 Engineering Change Proposals.

As prescribed in 1843.205-70(a)(1), insert the following clause,
modified to suit contract type:

ENGINEERING CHANGE PROPOSALS

(FEBRUARY 1998)

(a) Definitions.

"ECP" means an Engineering Change Proposal (ECP)
which is a proposed engineering change and the documentation by
which the change is described, justified, and submitted to the
procuring activity for approval or disapproval.

(b) Either party to the contract may originate ECPs. The originator
shall forward proposed ECPs to the Contracting Officer. Unless
another process has been approved by the Government or specified
by the Contracting Officer, the ECP formats, forms and controls
specified in MIL-STD-973 shall be used. Implementation of an approved
ECP may occur by either a supplemental agreement or, if appropriate,
as a written change order to the contract.

(c) Any ECP submitted to the Contracting Officer shall include
a "not-to-exceed"
[price or estimated cost] increase or decrease adjustment amount,
if any, and the required [time of delivery or period of performance]
adjustment, if any, acceptable to the originator of the ECP. If
the change is originated within the Government, the Contracting
Officer shall obtain a written agreement with the contractor regarding
the "not-to-exceed"
[price or estimated cost] and [delivery or period of performance]
adjustments, if any, prior to issuing an order for implementation
of the change.

(d) After submission of a contractor initiated n ECP, the contracting
officer may require the contractor to submit the following information:

(1) Cost or pricing data in accordance with FAR 15.403-5 if the
proposed change meets the criteria for its submission under FAR
15.403-4; or

(2) Information other than cost or pricing data adequate for contracting
officer determination of price reasonableness or cost realism.
The contracting officer reserves the right to request additional
information if that provided by the contractor is considered inadequate
for that purpose. If the contractor claims applicability of one
of the exceptions to submission of cost or pricing data, it shall
cite the exception and provide rationale for its applicability.

(e) If the ECP is initiated by NASA, the contracting officer shall
specify the cost information requirements, if any.

(End of clause)

ALTERNATE I

(JULY 1997)

As prescribed in 1843.205-70(a)(2), add the following paragraph
(f), modified to suit contract type, to the basic clause:

(f) If the ___ [price or estimated cost] adjustment proposed for
any Contractor-originated ECP is ___ [insert a percent or dollar
amount of the contract price or estimated cost] or less, the ECP
shall be executed with no adjustment to the contract ___ [price
or estimated cost].

ALTERNATE II

(SEPTEMBER 1990)

As prescribed in 1843.205-70(a)(3), add the following sentence
at the end of paragraph (c) of the basic clause:

An ECP accepted in accordance with the Changes clause of this
contract shall not be considered an authorization to the Contractor
to exceed the estimated cost in the contract Schedule, unless
the estimated cost is increased by the change order or other contract
modification.

1852.243-71 Shared Savings.

As prescribed in 1843.7102, insert the following clause:

SHARED SAVINGS

(MARCH 1997)

(a) The Contractor is entitled, under the provisions of this clause,
to share in cost savings resulting from the implementation of
cost reduction projects which are presented to the Government
in the form of Cost Reduction Proposals (CRP) and approved by
the Contracting Officer. These cost reduction projects may require
changes to the terms, conditions or statement of work of this
contract. Any cost reduction projects must not change the essential
function of any products to be delivered or the essential purpose
of services to be provided under the contract.

(b) Definitions:

(1) Cost savings, as contemplated by this clause mean savings
that result from instituting changes to the covered contract,
as identified in an approved Cost Reduction Proposal.

(2) Cost Reduction Proposal - For the purposes of this
clause, a Cost Reduction Proposal means a proposal that recommends
alternatives to the established procedures and/or organizational
support of a contract or group of contracts. These alternatives
must result in a net reduction of contract cost and price to NASA.
The proposal will include technical and cost information sufficient
to enable the Contracting Officer to evaluate the CRP and approve
or disapprove it.

(3) Covered contract - As used in this provision, covered
contract means the contract, including unexercised options but
excluding future contracts, whether contemplated or not, against
which the CRP is submitted.

(4) Contractor implementation costs - As used in this provision,
Contractor implementation costs, or "implementation costs",
shall mean those costs which the Contractor incurs on covered
contracts specifically in developing, preparing, submitting, and
negotiating a CRP, as well as those costs the Contractor will
incur on covered contracts to make any structural or organizational
changes in order to implement an approved CRP.

(5) Government costs - As used in this provision, the term
Government costs means internal costs of NASA, or any other Government
agency, which result directly from development and implementation
of the CRP. These may include, but are not limited to, costs associated
with the administration of the contract or with such contractually
related functions such as testing, operations, maintenance and
logistics support. These costs also include costs associated with
other Agency contracts (including changes in contract price or
cost and fee) that may be affected as a result of the implementation
of a CRP. They do not include the normal administrative costs
of reviewing and processing the Cost Reduction Proposal.

(c) General. The Contractor will develop, prepare and submit CRP's
with supporting information as detailed in paragraph (e) of this
clause, to the Contracting Officer. The CRP will describe the
proposed cost reduction activity in sufficient detail to enable
the Contracting Officer to evaluate it and to approve or disapprove
it. The Contractor shall share in any net cost savings realized
from approved and implemented CRPs in accordance with the terms
of this clause. The Contractor's actual percentage share of the
cost savings shall be a matter for negotiation with the Contracting
Officer, but shall not, in any event, exceed 50 percent of the
total cost savings recognized by the Contracting Officer. The
Contractor may propose changes in other activities that impact
performance on its contract, including Government and other Contractor
operations, if such changes will optimize cost savings. A Contractor
shall not be entitled to share, however, in any cost savings that
are internal to the Government, or which result from changes made
to any contracts to which it is not a party even if those changes
were proposed as a part of its CRP. Early communication between
the Contractor and Government is encouraged. The communication
may be in the form of a concept paper or preliminary proposal.
The Government is not committed to accepting any proposal as a
result of these early discussions.

(d) Computation of cost savings. The cost savings to be shared
between the Government and the Contractor will be computed by
the Contracting Officer by comparing a current estimate to complete
(ETC) for the covered contract, as structured before implementation
of the proposed CRP, to a revised ETC which takes into account
the implementation of that CRP. The cost savings to be shared
shall be reduced by any cost overrun, whether experienced or projected,
that is identified on the covered contract before implementation
of the CRP. Although a CRP may result in cost savings that extend
far into the future, the period in which the Contractor may share
in those savings will be limited to no more than five years. Implementation
costs of the Contractor must be considered and specifically identified
in the revised ETC. The Contracting Officer shall offset Contractor
cost savings by any increased costs (whether implementing or recurring)
to the Government when computing the total cost savings to be
shared. The Contractor shall not be entitled, under the provisions
of this clause, to share in any cost reductions to the contract
that are the result of changes stemming from any action other
than an approved CRP. However, this clause does not limit recovery
of any such reimbursements that are allowed as a result of other
contract provisions.

(e) Supporting Information. As a minimum, the Contractor shall
provide the following supporting information with each CRP:

(1) Identification of the current contract requirements or established
procedures and/or organizational support which are proposed to
be changed.

(2) A description of the difference between the current process
or procedure and the proposed change. This description shall address
how proposed changes will meet NASA requirements and discuss the
advantages and disadvantages of the existing practice and the
proposed changes.

(3) A list of contract requirements which must be revised, if
any, if the CRP is approved, along with proposed revisions. Any
changes to NASA or delegated contract management processes should
also be addressed.

(4) Detailed cost estimates which reflect the implementation costs
of the CRP.

(5) An updated ETC for the covered contract, unchanged, and a
revised ETC for the covered contract which reflects changes resulting
from implementing the CRP. If the CRP proposes changes to only
a limited number of elements of the contract, the ETCs need only
address those portions of the contract that have been impacted.
Each ETC shall depict the level of costs incurred or to be incurred
by year, or to the level of detail required by the Contracting
Officer. If other CRPs have been proposed or approved on a contract,
the impact of these CRPs must be addressed in the computation
of the cost savings to ensure that the cost savings identified
are attributable only to the CRP under consideration in the instant
case.

(6) Identification of any other previous submissions of the CRP,
including the dates submitted, the agencies and contracts involved,
and the disposition of those submittals.

(f) Administration.

(1) The Contractor shall submit proposed CRPs to the Contracting
Officer who shall be responsible for the review, evaluation and
approval. Normally, CRP's should not be entertained for the first
year of performance to allow the Contracting Officer to assess
performance against the basic requirements. If a cost reduction
project impacts more than a single contract, the Contractor may,
upon concurrence of the Contracting Officers responsible for the
affected contracts, submit a single CRP which addresses fully
the cost savings projected on all affected contracts that contain
this Shared Savings Clause. In the case of multiple contracts
affected, responsibility for the review and approval of the CRP
will be a matter to be decided by the affected Contracting Officers.

(2) Within 60 days of receipt, the Contracting Officer shall complete
an initial evaluation of any proposed cost reduction plan to determine
its feasibility. Failure of the Contracting Officer to provide
a response within 60 days shall not be construed as approval of
the CRP. The Government shall promptly notify the Contractor of
the results of its initial evaluation and indicate what, if any,
further action will be taken. If the Government determines that
the proposed CRP has merit, it will open discussions with the
Contractor to establish the cost savings to be recognized, the
Contractor's share of the cost savings, and a payment schedule.
The Contractor shall continue to perform in accordance with the
terms and conditions of the existing contract until a contract
modification is executed by the Contracting Officer. The modification
shall constitute approval of the CRP and shall incorporate the
changes identified by the CRP, adjust the contract cost and/or
price, establish the Contractor's share of cost savings, and incorporate
the agreed to payment schedule.

(3) The Contractor will receive payment by submitting invoices
to the Contracting Officer for approval. The amount and timing
of individual payments will be made in accordance with the schedule
to be established with the Contracting Officer. Notwithstanding
the overall savings recognized by the Contracting Officer as a
result of an approved CRP, payment of any portion of the Contractor's
share of savings shall not be made until NASA begins to realize
a net cost savings on the contract (i.e., implementation, startup
and other increased costs resulting from the change have been
offset by cumulative cost savings). Savings associated with unexercised
options will not be paid unless and until the contract options
are exercised. It shall be the responsibility of the Contractor
to provide such justification as the Contracting Officer deems
necessary to substantiate that cost savings are being achieved.

(4) Any future activity, including a merger or acquisition undertaken
by the Contractor (or to which the Contractor becomes an involved
party), which has the effect of reducing or reversing the cost
savings realized from an approved CRP for which the Contractor
has received payment may be cause for recomputing the net cost
savings associated with any approved CRP. The Government reserves
the right to make an adjustment to the Contractor's share of cost
savings and to receive a refund of moneys paid if necessary. Such
adjustment shall not be made without notifying the Contractor
in advance of the intended action and affording the Contractor
an opportunity for discussion.

(g) Limitations. Contract requirements that are imposed by statute
shall not be targeted for cost reduction exercises. The Contractor
is precluded from receiving reimbursements under both this clause
and other incentive provisions of the contract, if any, for the
same cost reductions.

(h) Disapproval of, or failure to approve, any proposed cost reduction
proposal shall not be considered a dispute subject to remedies
under the Disputes clause.

(i) Cost savings paid to the Contractor in accordance with the
provisions of this clause do not constitute profit or fee within
the limitations imposed by 10 U.S.C. 2306(d) and 41 U.S.C. 254(b).

(End of clause)

1852.243-72 Equitable Adjustments.

As prescribed in 1843.205-70(b), insert the following clause.

EQUITABLE ADJUSTMENTS

(APRIL 1998)

(a) The provisions of all other clauses contained in this contract
which provide for an equitable adjustment, including those clauses
incorporated by reference with the exception of the "Suspension
of Work" clause (FAR 52.242-14), are supplemented as follows:

Upon written request, the Contractor shall submit a proposal for
review by the Government. The proposal shall be submitted to the
contracting officer within the time limit indicated in the request
or any extension thereto subsequently granted. The proposal shall
provide an itemized breakdown of all increases and decreases in
the contract for the Contractor and each subcontractor in at least
the following detail: material quantities and costs; direct labor
hours and rates for each trade; the associated FICA, FUTA, SUTA,
and Workmen's Compensation Insurance; and equipment hours and
rates.

(b) The overhead percentage cited below shall be considered to
include all indirect costs including, but not limited to, field
and office supervisors and assistants, incidental job burdens,
small tools, and general overhead allocations. "Commission"
is defined as profit on work performed by others. The percentages
for overhead, profit, and commission are negotiable according
to the nature, extent, and complexity of the work involved, but
in no case shall they exceed the following ceilings:

Overhead(Percent)

Profit(Percent)

Commission

To Contractor on work performed by other than its own forces

-----

-----

10 percent

To first tier subcontractor on work performed by its subcontractors

-----

-----

10 percent

To Contractor and/or subcontractors on work performed with their own forces

10 percent

10 percent

-----

(c) Not more than four percentages for overhead, profit, and commission
shall be allowed regardless of the number of subcontractor tiers.

(d) The Contractor or subcontractor shall not be allowed overhead
or commission on the overhead, profit, and/or commission received
by its subcontractors.

(e) Equitable adjustments for deleted work shall include credits,
limited to the same percentages for overhead, profit, and commission
in paragraph (b) of this clause.

(f) On proposals covering both increases and decreases in the
amount of the contract, the application of the overhead, profit,
and commission shall be on the net change in direct costs for
the Contractor or the subcontractor performing the work.

(g) After receipt of the Contractor's proposal, the contracting
officer shall act within a reasonable period, provided that when
the necessity to proceed with a change does not permit time to
properly check the proposal, or in the event of a failure to reach
an agreement on a proposal, the contracting officer may order
the Contractor to proceed on the basis of the price being determined
at the earliest practicable date. In such a case, the price shall
not be more than the increase or less than the decrease proposed.

(End of clause)

1852.244-70GeographicParticipationintheAerospaceProgram.

As prescribed in 1844.204-70, insert the following clause:

GEOGRAPHIC PARTICIPATION IN THE AEROSPACE PROGRAM

(APRIL 1985)

(a) It is the policy of the National Aeronautics and Space Administration
to advance a broad participation by all geographic regions in
filling the scientific, technical, research and development, and
other needs of the aerospace program.

(b) The Contractor agrees to use its best efforts to solicit subcontract
sources on the broadest feasible geographic basis consistent with
efficient contract performance and without impairment of program
effectiveness or increase in program cost.

(c) The Contractor further agrees to insert this clause in all
subcontracts of $100,000 and over.